Oncology and Vertically Integrated Supply Channels

AVBCC Highlights

Supply channels are always complex, but within the oncologic pharmaceutical distribution space, there are added pressures.

With so many new drugs being approved and sped to market, there are increased demands from stakeholders to ensure the right diagnosis, the right drug selection, the right safety and monitoring, and the right programs to support patients on sustained therapy.

Although a few players are dominating the market, organizations playing roles in all phases of the supply structure are moving into each other’s spheres of expertise.

With change an assumed constant in today’s marketplace, the panel discussed the current challenges and opportunities facing supply channels.

Limited Distribution Specialty Pharmacy Networks

Susan Weidner, Senior Vice President for IntrinsiQ Specialty Solutions, AmerisourceBergen, said there are 2 aspects to consider: distribution and access.

“Although we’re still seeing most distributors having access to the products, the approach around a given therapy and the access by a specialty pharmacy is changing,” said Ms. Weidner. “The patient population and the competitiveness in that category determines whether or not the limited aspect is then broadened from an SP perspective.”

She adds: “Newer therapies have to be balanced between how the drug comes into the channel and who has the ability to provide that [drug] to the patients and the support that they need. The latter is more complicated. It requires much more coordination of care. We’re not sure the others will have that capability.”

By limiting the network for physician practices and others to deliver, it will really determine what kind of cost and outcome can be generated around the products, she concluded.

Douglas Bock, MBA, Partner and Co-founder of Archbow Consulting, which helps manufacturers with downstream supply chain issues, said he doesn’t think narrow networks or limited distribution are going to go away.

“But it’s definitely evolving because now it’s less about [whether] the pharmacy can handle the patient and more about where is the patient,” he noted.

Mr. Bock predicted 2 things: a consolidation of the specialty pharmacy industry as well as that limited distribution being available to large, organized practices who are seeing patients with rare conditions.

Amy Valley, PharmD, who leads clinical strategy and technology solutions at Cardinal Health, added that the current big wholesalers have limited distribution capabilities as well. “They own 3 PL companies, have hub services, and are already competing to service the patient.”

All 3 wholesalers, she added, are ramping up their cold chain capabilities and more to prepare for the future. “It speaks to the diversity of capabilities that are present already in our supply chain and will continue to evolve for the future,” she said.

Tim Ward, Esq., CAMS, President of Hercules Pharmaceuticals, a national specialty distributor, warned about dangers in the current system.

“In pharmaceuticals, the power to exclude and to limit always has a coefficient, which is somebody is exploiting someone else. There are good reasons to have limited distribution networks but you time and time see the misuse of limited distribution networks,” he said.

“I think it’s incumbent upon the industry to concurrently look at this ethical allocation of value,” he added. “In a normative marketplace, value will be allocated pursuant to market forces and decision makers. Unfortunately, in the pharmaceutical supply chain, the marketplace has been disintermediated by through-purchasing organizations. They only exist because accountants get to report pricing on service fees versus pricing.”

Fragile Supply Chain

Moderator Doug Long, Vice President, Industry Relations, IQVIA, noted several more challenges that are hurting the supply chain. On the industry side, there’s the proliferation of generic companies, strong competition that drives prices down, and unexpected issues such as overseas generic companies with a large market share dropping out of the market because of quality issues. Now, biosimilar drugs are facing the same challenges as generics.

On the patient side, Mr. Long cited conflicts between in-network/out-of-network medication coverage and the need for prior authorization even for in-network coverage. As a result, some patients have not been able to get the right drug or are unable to afford to continue taking it.

Kent Rogers, MBA, Venture Partner at ARCH Venture Partners, said the industry has changed. “Instead of 3 wholesalers owning 80% of the specialty pharmacy market, 3 payers own 80% of the specialty pharmacy market. So now you’ve got a fox in the hen house,” he said.

“If you’re a manufacturer and you want to launch your product, on the one hand, what’s my formulary status? And, on the other hand, I’ve got to give you a discount to distribute my drug,” Mr. Rogers explained. “If you’re a hospital system that wants to get into the game, now you’re competing with me and I’m a payer [and] I don’t know if I want you in the network.”

The Future

As for what’s coming up, the panelists shared the following predictions:

  • Medically Integrated Pharmacies

    “This time next year we’ll have documented demonstration that medically integrated pharmacies work in the community,” said Ms. Weidner. “Through smarter approaches to collaboration and management we’re able to support more targeted therapies and approaches for patients, whether it’s precision medicine or multi-drug management with IVs and orals.”

    The goal, she said, is for the patient to get the “right drug from the beginning, which hopefully generates longer term outcomes.”

    Earlier in the discussion, she also noted the following: “[The pharmacies are] the closest to the providers, and they have access to electronic medical records and the care team. They are the ones being asked to take on risk and be responsible for this patient outcome. They should have an expanded opportunity over what they do today to be able to participate.”

  • Building on Innovation

    Mr. Bock said innovations developed to distribute more expensive drugs, such as cell and gene therapies, will start trickling down into more commonly used drugs.

  • Creating Room for Innovators

    Mr. Ward said he believed that not much will change in the next year because the incumbent companies have the advantage and it’s hard for the innovators to find space.

    “I would recommend that you give a lane for innovation and make the incumbents compete against the innovators. Obviously, changes are afoot, and the market and efficiencies and competition should dictate the change,” he said.

  • Expect State Legislatures to Take Center Stage

    Mr. Kent added that state legislatures, which work much faster than the federal level, will be on the forefront of the supply channel issues, which could be both “good and bad.”

  • Making Participation in Value-Based Care Programs Easier

    Dr. Valley said her everyday focus is on “developing technology solutions to make it easier for providers and practices in the community to participate in Value-Based Care Programs in limited networks or broader networks.”

    Technological innovation will be key, she said, to “relieve the administrative burden associated with being able to fully participate in these networks and to do the care management.”

  • Compete With a Performance Scoreboard

    Christopher Kennedy, CEO of EDIRNA, a new editing RNA company focusing on oncology, said he would like to see adoption of a care management “performance scoreboard” that would provide patient-based metrics to “justify” getting into a big network. It would cover measures such as patient-reported outcomes, quality of life, and patient experience.

    “I think it’s a time in our industry where we say, how do we redefine what it means to be in network or in this limited-distribution channel and start equating that to patient outcomes,” he said.

    “Then, let’s reward the right stakeholders who are delivering the value, whether that’s the care provider, the pharmacy, the physician, the wholesaler, [or] the distribution chain. Let’s reward and align everything. That’s how we’ll get to VBAs in 5 years.”

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